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Montridge Town Council

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by nileshdalvi » Tue Sep 27, 2011 8:44 am
The Montridge Town Council has just voted to increase the local tax rate on all new commercial businesses within the town's border. The council believes that if it acts to keep the town as residential as possible, the town will attract wealthier people who will gravitate toward the town's charm and will not complain about an increase in property taxes.

Which of the following best expresses the logical pattern underlying the Montridge Town Council's recent decision?

"¢ It rationalized that a drop in revenue from one source would ultimately be offset by an increase from another source.
"¢ It establishes its distaste for commercial activity within Montridge.
"¢ It questioned the assumption that all commercial businesses would react to the tax hike by leaving town.
"¢ It believes that in order to achieve goals, they must be prioritized.
"¢ It weighed several options and chose the one that it believe would result in the least collateral damage.
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by chetansharma » Tue Sep 27, 2011 10:05 am
IMO the answer is A.
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by navami » Wed Sep 28, 2011 5:06 am
iMO C
This time no looking back!!!
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by shankar.ashwin » Wed Sep 28, 2011 5:30 am
A IMO

Notice the last line mentions rich people coming to town will not complain about increase in property taxes. So the council expects increase in revenue from some other source.

A represents the same logical pattern
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by GmatKiss » Wed Sep 28, 2011 10:52 am
IMO:A
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by theforrestgump » Wed Sep 28, 2011 12:20 pm
I say A
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by mhananoki » Wed Sep 28, 2011 12:39 pm
I don't agree that is A. How can there be a drop in revenue if commercial businesses will be taxed more? This will increase revenues. It is true there could be a drop in revenues if commercial businesses subsequently left town, but I am not sure the council believes that will happen.

I think E is a good answer because the council is trying to limit the number of commercial businesses who will complain about the increase in taxes--the complaints are the collateral damage. There will be a lot of complaints if there are large numbers of new commercial businesses. So by getting more residents, there will be less collateral damage.
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by ColumbiaVC » Wed Sep 28, 2011 9:07 pm
A
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by 786 » Thu Sep 29, 2011 2:04 am
A "¢ It rationalized that a drop in revenue from one source would ultimately be offset by an increase from another source.
Is the drop of revenue specified in the argument ?

E. It weighed several options and chose the one that it believe would result in the least collateral damage.
I dont think several options are evident from the argument .

IMO D .
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by gunjan1208 » Thu Sep 29, 2011 2:47 am
IMO E. What is the OA?
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by sl750 » Thu Sep 29, 2011 6:36 am
Choice A is the correct answer

Drop in revenue from property tax, offset by an increase in local tax rate(commercial businesses)

In E, we don't know what the other options were. It is not mentioned in the argument and I don't think it is advisable to assume that the council considered other options
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by mankey » Sat Oct 01, 2011 4:05 am
Can someone please provide OA for this.

Thanks
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by kandulab » Mon Oct 03, 2011 10:09 am
I too got the answer wrong. I think the below logic works, let me know anything wrong with it

I think the council wants to keep the town residential by increasing taxes on commercial businesses so that the commercial business will obviously shift from that town and revenues from local tax drop. By keeping the town residential and increasing property taxes, the council intends to compensate the loss from local tax..

mhananoki wrote:I don't agree that is A. How can there be a drop in revenue if commercial businesses will be taxed more? This will increase revenues. It is true there could be a drop in revenues if commercial businesses subsequently left town, but I am not sure the council believes that will happen.

I think E is a good answer because the council is trying to limit the number of commercial businesses who will complain about the increase in taxes--the complaints are the collateral damage. There will be a lot of complaints if there are large numbers of new commercial businesses. So by getting more residents, there will be less collateral damage.
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by mehrasa » Mon Oct 03, 2011 10:05 pm
nileshdalvi wrote:The Montridge Town Council has just voted to increase the local tax rate on all new commercial businesses within the town's border. The council believes that if it acts to keep the town as residential as possible, the town will attract wealthier people who will gravitate toward the town's charm and will not complain about an increase in property taxes.

Which of the following best expresses the logical pattern underlying the Montridge Town Council's recent decision?

"¢ It rationalized that a drop in revenue from one source would ultimately be offset by an increase from another source.
"¢ It establishes its distaste for commercial activity within Montridge.
"¢ It questioned the assumption that all commercial businesses would react to the tax hike by leaving town.
"¢ It believes that in order to achieve goals, they must be prioritized.
"¢ It weighed several options and chose the one that it believe would result in the least collateral damage.

my pick will be A although i already chose c
the council is going to increase the tax and make the city as residential as possible ==> the council has predicted that the town may loose some of its business; however, when the wealthier ppl come, this decrease will offset
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by Geva@EconomistGMAT » Tue Oct 04, 2011 12:21 am
The answer is A. Careful reading of the argument is needed here, as the key concept that makes A the right answer is dropped unceremoniously at the very last sentence: attract wealthier people ... will not complain about an increase in property taxes.

the town is going to increase the tax on business with the stated intention of keeping the town as residential as possible - meaning that the tax is raised NOT to increase revenues from businesses, but to drive them AWAY (eliminate C, as this assumption is not questioned but actually reinforced.)

But if the tax is increased for businesses, why would the wealthier people who move in complain about the property tax? they are moving in as residents, not as businesses (since the town is going to become residential), so the tax in the first sentence does not apply to them?

The answer is that it's not the same tax - the city plans to impose a residential property tax after the wealthy people move in. Which means that A is indeed correct - a drop in tax revenues from businesses will ultimately be offset by another source - property taxes for rich people.
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